April hike in NICs to add extra £1.25 million in costs for free fuel firms

Lex Autolease estimates that 3% of firms in the UK currently still offer free fuel, despite the growing impact of fuel and tax rises. And it calculates that the National Insurance hike from 12.8% to 13.8% will cost these firms an additional £1.25 million, excluding the rise in fuely duty, which will also take place on 1 April and will add 3-4p to a litre of petrol and diesel.

According to Lex, taken together, private fuel and NIC will cost UK firms, on average, £6 per driver, per day – which equates to over £2,200 annually.

Andrew Hogsden, head of financial consultancy at Lex Autolease, said: 'Private fuel is one of the most expensive perks a company can provide. It falls into the same category of benefit as a final salary pension scheme which many organisations have withdrawn from.'

And Lex Autolease points out that the free fuel benefit is tantamount to firms putting a cap on pump prices, whereby the driver’s tax contribution remains the same, but the firm continues to subsidise the spiralling fuel costs.

Mr Hogsden explained: 'Offering free fuel might seem like a nice sweetener to retain or attract employees, but it can be a bitter pill to swallow as it exposes the employer to an ever-increasing fuel bill and National Insurance contributions.

'From a cost control perspective it’s almost always better to pay off these employees with an increase in salary or, better still, a one off bonus which will keep down costs in the long term.'

In response, Lex Autolease has issued its top tips for removing free private fuel:• Cease giving free private fuel to new recruits immediately• Encourage existing recipients to opt out by educating them about the personal tax cost • Buy out the remaining drivers through a non-pensionable, one off lump sum• Set a date by which the benefit will cease to be provided by the company.